WORLD BANK REFORMS “SKATE ON THIN ICE.”

by Simangaliso Ncube
After nearly a decade of implementing externally designed economic reforms, some African countries now want a chance to pursue their own economic policies as an alternative.

Calls for alternatives follow reported failures to address both economic and social issues through standard prescriptions contained in the Structural Adjustment Programmes (SAPs) backed by the World Bank and the International Monetary Fund (IMF).

It is a bit of a sterile debate: the Bank says the reforms are working, the recipients say they are not.

In a recently released World Bank research report, Adjustment in Africa: Reforms, Results, and the Road Ahead, six countries out of 29 are identified as having achieved significant improvements in macro-economic policies.

The Bank argues that only those countries that adopted the programmes wholeheartedly registered the greatest economic improvement.

For this group of countries, there was a median increase of two percent in the growth rate of gross domestic product (GDP) a year.

Industrial performance also improved due to a two percent growth in agriculture. Exports grew by eight percent while domestic savings greatly improved, resulting in increased investment in these countries.

The Bank attributes all this growth to currency depreciation — a cornerstone of the programme’s policies.

Lyn Squire, the Director of the Bank’s policy research department says “this shows the policies are working in those countries where they were implemented, but in some countries they were not effectively implemented at all”.

In sub-Saharan Africa, the Bank’s six success stories are Ghana, Tanzania, Gambia, Burkina Faso, Nigeria and Zimbabwe (in order of success).

Critics, mainly from the non-governmental organization (NGO) community, accuse the Bank of skating on thin ice by citing them.

Some NGOs have actually labelled the World Bank study as “a blend of half-truths, Over simplifications and institutional propaganda”,

while others say it is an “insensitive attempt to dismiss the realities and suffering of the poor with self-serving assumptions”.

Critics argue that the Bank’s success claims are modest and are based on a narrow set of macroeconomic measures and indicators.

For instance, Nigeria’s inclusion is particularly surprising. “It is difficult — if not impossible — to reconcile this judgement with the Nigerian economic situation in early 1994,” a Standard Chartered Bank report points out.

According to Standard Chartered, Nigeria’s economic performance provides evidence to the contrary: – GDP growth down to 3.3 percent in 1992/3 from an average of five percent in 1988-91;

– A high inflation rate of 100 percent at the end of 1993;

– An unsustainable fiscal deficit of N63 billion (US$2.9 billion) caused by massive public spending;

– A balance of payments deficit of over US$4.6 billion; and

– Debt servicing arrears of US$6 billion at the end of 1993 — forecast to exceed US$8.5 billion by December 1994.1n Tanzania, the improvements in economic indicators have been realised at a great cost to the country’s universal primary education (UPE) — which former president Julius Nyerere says has dropped from 100 percent to 73 percent in the past five years.

Zimbabwe’s macro-economic policies, on the other hand, have undergone significant improvement which the Bank has taken credit for, but much of the improvement occurred between 1987 and 1990 — shortly before introducing economic reforms.

Despite its faith in SAPs, the World Bank admit that “not a single African country has achieved a ‘sound’ macro-economic policy stance.” This stance is defined as: – inflation rates of below 10 percent;

– very low fiscal deficits; and

– Competitive exchange regimes.

However, the policy report dismisses the widespread pessimism about SAPs as unwarranted Since a certain measure of progress has been achieved through the programmes. The report concludes with a hopeful note “that adjustment – – even incomplete adjustment — can put African countries on the road to development.”

But in most African countries, the programmes have apparently failed to achieve one of their key objectives — poverty reduction through economic growth.

Even in Ghana — the jewel in the World Bank crown — analysts argue that SAPs have not done much to eradicate poverty. They say that poor people in the country will not cross the poverty line for another 50 or more years.

Christian Aid, a NGO, in its report on effects of SAPs, points out that poverty reduction can only be achieved through changing the basic economic model on which structural adjustment is based, the reason being that SAPS are based on free-market policies which are inappropriate for most African countries.

Therefore, ill their present formulation, the bank’s policies remain inoperable in most African countries.

United Nations (UN) Secretary General, Boutros Boutros-Ghali, acknowledges failure of SAPs throughout the continent and recently called on African leaders to pay special attention to addressing the social impact of these programmes.

During a UN General Assembly meeting held at the end of 1993, Boutros-Ghali said, “the fruits of their (SAPs) efforts have yet to ripen, but the hardships they have brought are already very apparent. ”

Some economists are convinced that effort to alleviate poverty failed because SAPs policy proposals were drafted without the participation of the affected people. They claim that the Bank’s document is detached from Africa’s realities.

For this reason, these economists have come to define SAPs as “plans that countries have to agree to if they are to receive funds from the World Bank and the IMF.”

But such donor-recipient relations were out rightly rejected by African heads of states at the recent Global Coalition for Africa (GCA) meeting in Harare.

Nyerere, also chairman of the South Commission, told the participants that, “they (donors) should let us formulate and implement our own policies.”

Other leaders agreed, arguing that Africa already had enough trained people to carry out such a mission. However, given the continent’s weak bargaining position, it remains uncertain whether the proposals will be implemented.

Such a backdrop of debate is not helping the SAP backers much and is giving advocates of alternative paths to Africa’s economic recovery a chance to call for a change.

As far back as 1979, member states of the Organization of African Unity (OAU) called upon the organization to come up with a policy document that would offer an alternative to World Bank and IMF-backed economic reforms.

It gave the job to the United Nations Economic Commission for Africa (ECA), whose task was to design a “people-centred way of getting economic policies right.”

Professor Adebayo Adedeji, then ECA Executive Secretary, said the commission was convinced there “has to be a way for African countries to grow and develop rather than to decline and decay.”

Under him, the ECA prepared the document: African Alternative Framework to Structural Adjustment Programme (AAF-SAP).

Unlike SAPs, the AAF offers a broad framework and not a standard programme to be implemented uniformly everywhere regardless of different features and specific problems in individual countries.

The document also outlines the implementation process in three distinct levels — from the individual national level to sub-regional and finally to international levels.

At national level, central government activities need to be closely co-ordinated with those of the private sector, non-governmental organizations and trade unions — all of which are important in the mobilization and use of resources.

The second stage of the implementation is what most African states are calling out for — closer cooperation in the region, giving credit to organizations like the Southern African Development Community (SADC.

At the final stages of implementing the AAF-SAP, the commission asks the international financial institutions including the World Bank and the IMF to “do all they can to respect the development priorities that African countries set themselves.”

Although the OAU adopted this document in Addis Ababa, Ethiopia, in April 1989, no African country has taken any steps to implement its recommendations. But five years later, many feel that it is time to give it a second critical look.

With the failure of World Bank reforms, the onus now rests entirely with the Africans to popularize and mobilize for implementation of alternative programmes. (SARDC


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